UNITED STATES
                 SECURITIES AND EXCHANGE COMMISSION
                        Washington, DC 20549

                            FORM 10-KSB

               ANNUAL REPORT UNDER SECTION 13 OR 15(d)
               OF THE SECURITIES EXCHANGE ACT OF 1934

             FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

Commission File Number: 001-14519

                       BALTIA AIR LINES, INC.
       (Exact name of registrant as specified in its charter)

        NEW YORK                         11-2989648
(State of Incorporation)          (IRS Employer Identification No.)

         63-25 SAUNDERS STREET, SUITE 7 I, REGO PARK, NY 11374
            (Address of principal executive offices)

Registrant's telephone number, including area code: (718) 275-5205

Securities Registered under Section 12(g) of the Exchange Act:

Common Stock - Par Value $.0001 Per Share

Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
and (2) has been subject to such filing requirements for the past 90
days. [x] yes [ ] no

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in part III of this Form 10-KSB or any amendment to this
Form 10-KSB. [x]

Registrant has not commenced revenue operations to date. Registrant's
revenues for its fiscal year 2006: $-0-

The aggregate market value of the voting common equity held by
non-affiliates as of March 29, 2007 is $1,434,162.

As of March 29, 2007 there were 126,300,897 shares of common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (Check one): No [X]





PART I

Item 1. Description of Business.

The Company was organized in the State of New York, August 24, 1989.  Its
objective is to provide scheduled air transportation from the U.S. to
Russia, and former Soviet Union countries. In 1991, the Department of
Transportation (DOT) granted the Company routes to provide non-stop
passenger, cargo and mail service from JFK Airport in New York to St.
Petersburg and from JFK to Riga, with online service to Minsk, Kiev and
Tbilisi, as well as back up service to Moscow.  Due to a lack of
sufficient working capital, the US Department of Transportation
terminated the Company's route authority without prejudice to reapply
when financing was in hand.  Thereafter, Baltia has engaged in market
research, operations development and planning, as well as activities to
raise the requisite funding in order to reapply with the US Department of
Transportation. These costs are borne by Baltia's shareholders and
principals.
Once fully operational, Baltia expects that it will employ approximately
200 persons full-time and be operating in compliance with all regulations
applicable to U.S.
airlines.

With the exception of the JFK - Moscow route, there exists no nonstop
competitive air transportation service on the routes for which Baltia can
reapply pending financing.  Baltia intends to provide full service, i.e.
passenger, cargo and mail, and will
not be dependent upon one or a few major customers. Baltia has two
registered trademarks "BALTIA" and "VOYAGER CLASS" and five trademarks
are subject to registration.

There is currently no nonstop service from JFK to St. Petersburg.
Connecting service is provided mainly by foreign carriers. Finnair,
Lufthansa and SAS are the leading competitors in the US-Russia market.
KLM, British Airways, Air France, Austrian Airlines, and Swissair also
provide service. However, foreign carriers are required to have
intermediate stops at transit airports in their respective countries
(Helsinki, Frankfurt, Stockholm, Copenhagen, etc.) because they are
"third nation" airlines and as such cannot fly directly between the US
and Russia (only a US airline as well as a reciprocating Russian airline
is eligible to fly nonstop). Delta and Aeroflot currently operate between
JFK and Moscow.

Baltia's objective is to establish itself as the leading nonstop carrier
in the market niche over the North Atlantic with operations that are
profitable and growing over time. In order to accomplish this objective,
we intend to establish and maintain high quality service standards which
we believe will be competitive with the European airlines currently
providing connecting flights.  Baltia does not expect to be in direct
competition with deep discount airlines, including several East European
airlines and the offspring of the former Soviet airline Aeroflot, which
also provide connecting flights.

Baltia intends to provide First, Business, and Voyager Class
accommodations.  Baltia's passenger market strategy is tailored to
particular preferences of the various segments of its customer base, with
marketing attention particularly focused on American business travelers
with interests in Russia who require high quality, nonstop service from
the US to Russia.

Baltia's initial marketing strategy is based on existing agencies
specializing in the market, selected travel and business publications,
supplemented by direct mailings to corporate travel planners, and
individual American businesses that are currently involved in Russia.
Soon after the inauguration of flight service, Baltia plans to implement
its frequent flyer program. As the marketing matures, Baltia plans to
advertise to the general public throughout the US, and in Russia.  Baltia
also plans to sponsor selected industry and trade events in the US and in
St. Petersburg.

Baltia intends to provide customer service and reservations centers in
New York and in St. Petersburg, to list Baltia's schedules and tariffs in
the Official Airline Guide, and provide world wide access to reservations
on Baltia's flights through a major Computer Reservations and Ticketing
System ("CRS").

The Company intends to activate the reservations service when the DOT
issues its order authorizing Baltia to sell tickets (expected to be
approximately 30 to 45 days before the inaugural flight).

Baltia has identified the following market segments in the U.S.-Russia
market: (i) Business Travelers, (ii) General Tourism, (iii) Ethnic
Travelers, (iv) Special Interest Groups, (v) Professional Exchanges, and
(vi) Government and Diplomatic Travel.

Baltia believes that the direct nonstop service to be offered by it will
be superior to the stop-over service currently offered by foreign
airlines.   A comparison between the two services with respect to
passenger convenience and cargo transport efficiency is set forth below.

BALTIA - US flag, non-stop service:

With non-stop service, a passenger can fly from JFK to St. Petersburg in
about than 8 hours in a Boeing B747 wide body airplane. Cargo arrives
containerized, palletized, and secure.

Foreign, stop-over journeys:

With stop-over service, it would take a passenger 10 to 18 hours to fly
through Helsinki, Copenhagen, Moscow, or Frankfurt on a foreign carrier.
In addition, passengers must change to narrow-body aircraft at a layover
airport. Cargo is "broken up" and manually loaded onto narrow-body
aircraft, or trucked from Helsinki.

Baltia plans to operate efficiently and provide consistent high quality
service to passengers and cargo shippers alike in order to establish the
Company as the preferred airline in the market in comparison to its
competitors. The Company also plans to use targeted marketing of its
service to maintain and grow its market share.

Because of the increased reliability and comfort of a nonstop flight,
Baltia expects to capture a portion of the existing traffic.  Further, US
government traffic is required by law (Fly America Act) to fly on a US
Flag carrier when service is available.

In order to start revenue flight operations, the Company has to complete
FAA air carrier certification.  During this process the airline
demonstrates to the FAA how the airline will comply with the federal
aviation regulations.  As part of the process the FAA reviews the
Company's management and operational control.

The Company's staff has prior experience with the certification and has
worked closely with the New York Flight Standards District Office (NY
FSDO) and is familiar with procedures of the Certification
Standardization and Evaluation Team (CSET). The FAA certification is a
defined process, it is structured in phases with test gates, and requires
advance preparation on the part of the carrier. The FAA assembles a
certification team and the airline assembles its certification team,
acceptable to the FAA. The two teams interact at a counterpart level.
Each team has its team leaders and managers of different functions, for
example, maintenance, flight operations, cabin safety, etc. The following
table shows the basic outline of the certification process.

Documentation Period:
Formal application documents
Manual system, checklists, aircraft airworthiness records,
airport/enroute analyses, environmental impact analysis
Compliance statement, draft operation specifications
Training curricula
Mini-evacuation test plan
Proving flight plan
Requests for deviations and exemptions

Inspection and Demonstration Period:
Training of pilots, instructors, check airmen
Training of mechanics, instructors
Training of dispatchers
Training of flight attendants
Aircraft conformity check
Inspection of base of operations and stations JFK and St.
Petersburg
Mini evacuation test
Proving flights

During the documentation period the FAA in essence satisfies itself that
the new air carrier has properly documented its operating procedures,
that the aircraft and its documentation meet airworthiness requirements,
that maintenance and training facilities are qualified and their
curricula meets FAA requirements. During this period the Company prepares
draft Operation Specifications, which are refined and issued upon
certification.

During the inspection and demonstration stage, the FAA confirms that the
Company conducts its training in accordance with its procedures, under
FAA supervision. The FAA satisfies itself that the base station
facilities at JFK and St. Petersburg are appropriate for the proposed
operations with adequate equipment and arrangements in place. Aircraft
conformity check assures that the aircraft meets all airworthiness
requirements. The mini evacuation test demonstrates that the crew is
capable of evacuating the aircraft in emergency.  Finally, proving
flights demonstrate how the Company actually conducts its flights in
accordance with its specifications and procedures, and the test involves
simulated emergencies.

The air carrier certification process includes environment impact
analysis of the airline's operations. There is no specific cost attached,
and there are no special environmental procedures in addition to the
airline's operations specifications.  Standard industry operating
procedures include such environmental aspects as containment and cleaning
after an accidental fuel spill, handling of de-iceing liquid, waste
disposal, etc. Also, Baltia will have to conduct flight operations in
compliance with noise abatement regulations. Compliance with these
requirements is prescribed by Federal Aviation Regulation and is standard
in the industry.  The initial compliance cost is part of the air carrier
certification. The Company will carry airline liability insurance as
required for a US airline by DOT regulation.

During the past two years the Company has been preparing for air carrier
certification and is seeking funding to commence revenue flight
operations on the JFK - St. Petersburg route. Until the necessary funding
is in place, management is foregoing compensation and expects to
contribute administrative costs.

The Company does not engage in flight operations at this time and has
made no equipment purchases or sales. The change in aggregate financial
data during this year reflects the relatively small administrative costs
that were incurred and added to the pre-launching costs.

Baltia has arranged for a lease of a Boeing 747 aircraft from a reliable
lessor. The Company will execute the agreement when it has the financing.
The aircraft will be delivered fresh from check C, an FAA required
maintenance standard. The term "check C" refers to a mandatory, extensive
overall maintenance inspection program of an aircraft that is typically
conducted every two years. The marketing strategy relating to capacity
and overall quality of service as experienced by passengers is reflected
in the choice of aircraft.  Five aircraft types are capable of flying
nonstop on the JFK-St. Petersburg route, Boeing 747, MD11/DC10-30, Boeing
767, A340 and Boeing 777.  From among these, Baltia's management believes
that the cabin size of a Boeing 747 aircraft offers the greatest degree
of comfort and capacity for the JFK-St. Petersburg market.  Boeing 747
dispatch reliability lies within the 97% range (Boeing Report ID:RM
23004), which is a contributing factor to on-time dependability. Baltia's
on-time dependability is further enhanced because a Boeing 747, a four-
engine aircraft, is not subject to ETOPS regulations which could limit
flights during certain weather conditions. "ETOPS" is an acronym for
Extended Range Twin Engine Operations, which for a startup airline
generally requires that during year one a twin engine aircraft be
operated within 75 minutes from a suitable airport. If one of the
airports on the Great Circle route is unusable, a twin engine aircraft
would not receive dispatch clearance from JFK for a flight to St.
Petersburg.

With the Boeing 747 true wide body aircraft Baltia intends to provide
cargo service from JFK to St. Petersburg, offering containers, pallets,
and block space arrangements. Baltia expects to carry contract cargo for
express shippers.  Baltia plans to market its own "Baltia Courier",
"Baltia Express", and "Baltia Priority" express service for letter and
packages.  Baltia also expects revenues from diplomatic mail and cargo,
under the Fly America Act provision. This Act provides that when service
is available, US government traffic is required to fly on a US Flag
carrier.

Baltia has prepared passenger service and ground service arrangements at
JFK, and similar services are available at Pulkovo Airport in St.
Petersburg, based on recent contact. As a US carrier flying into a
foreign country, Baltia will be eligible to the same degree of priority
that a foreign carrier receives when arriving in the US.

Baltia intends to start the JFK-St. Petersburg service with one round-
trip flight per week, then increase the frequency to three round trips,
and then to five round trips, within a four-month period.

By starting with one roundtrip flight per week for the first four weeks,
Baltia not only accelerates and simplifies its FAA certification, but
expects to save itself the additional time it would incur to make needed
improvements and corrections. Starting with a light schedule, any
inefficiencies of a given flight may be corrected for the next flight.
Baltia management believes that in the initial four weeks, the Company
will attain high operating efficiencies and service standards. These
standards may be further refined during the following two months when
Baltia plans to increase service to three round-trips per week. Following
that, Baltia plans to increase service to five round trips per week, and
then subsequently to daily round trip flights as additional aircraft are
brought into service.  The transitional schedule allows Baltia to train
additional pilots, flight attendants, and support staff with a continuous
training program. It also allows Baltia marketing program to take effect
through its various segments.

During the past two years Baltia has also been preparing standards for
service. The care taken in establishing high standards has implications
beyond the launching of the JFK-St. Petersburg flight.  Baltia plans to
build operating modules and apply that know-how to develop new markets.
Once established, Baltia plans to duplicate its JFK-St. Petersburg
standards on flights on other transatlantic routes. By the end of year
one, Baltia plans to introduce three additional aircrafts.

Additional revenues from charter flying. In conjunction with its Part 121
air carrier certification ("Part 121"), referring to a Federal Aviation
Regulations' number, is an industry acronym used to describe a US airline
operating heavy jet aircraft) for scheduled service, Baltia intends to
seek certification for world wide charter service. Following
certification, Baltia plans to utilize aircraft time available between
scheduled service, to earn additional revenues from charters. We are also
considering qualifying our aircraft for military contracts.

As of December 31, 2006, Baltia has four full-time employees and five
part-time employees. SH&E, industry consulting firm based in New York, is
Baltia's consultant. Baltia's staff includes professionals who have
extensive major US airline experience in aircraft maintenance, airline
operations, airline regulatory compliance and administration.

Item 2.  Description of Property.

The Company's property consists of office equipment and operations
manuals.
The Company rents space for its headquarters at 63-25 Saunders Street,
Suite 7I, Rego Park, New York 11374, and leases operations space at
Concourse A, Terminal 4, JFK International Airport, at monthly rents of
$1,171 and $900, respectively.  The Company believes its property is
adequate to launch its services and the Company expects to increase space
within the first few months of operations.

Baltia has two registered trademarks "BALTIA" and "VOYAGER CLASS",
registered in Jan 7, 1992 and Jan 26, 1993, respectively.

Item 3. Legal Proceedings-

None.

Item 4. Submission of Matters to a Vote of Security Holders-

None.

PART II.

Item 5.  Market for Common Equity, Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities.

The following table sets forth the high and low sales prices, as quoted by the
OTCBB, for our common stock for each quarter during our two most recent fiscal
years ended December 31, 2005 and 2006. These quotations reflect inter-dealers
prices, without retail mark-ups, mark-downs or commissions, and may not
represent actual transactions.


      Fiscal Quarter Ended         High         Low
--------------------------- --------------- ----------------
        March 31, 2005            .09      .05
         June 30, 2005            .09      .06
    September 30, 2005            .11      .04
     December 31, 2005            .11      .06
        March 31, 2006            .07      .07
         June 30, 2006            .06      .06
    September 30, 2006            .03      .03
     December 31, 2006            .02      .02




The Company currently estimates that there are approximately 400 holders of
record of its common stock. Given its continuing need to retain any earnings to
fund its future operations and desired growth, the Company has not declared or
paid, nor does it currently anticipate declaring or paying for the foreseeable
future, any dividends on the Company's common stock.

The Company currently has no equity compensation plans, no written
purchase, savings, option, bonus, appreciation, profit sharing, thrift,
incentive, pension or similar plan or written compensation contracts.

Item 6.  Management's Discussion and Analysis or Plan of Operation.

The following discussion includes certain forward-looking statements
within the meaning of the safe harbor protections of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Statements that include words such as
"believe," "expect," "should," intend," "may," "anticipate," "likely,"
"contingent," "could," "may," or other future-oriented statements, are
forward-looking statements. Such forward-looking statements include, but
are not limited to, statements regarding our business plans, strategies
and objectives, and, in particular, statements referring to our
expectations regarding our ability to continue as a going concern,
generate increased market awareness of, and demand for, our service,
realize profitability and positive cash flow, and timely obtain required
financing. These forward-looking statements involve risks and
uncertainties that could cause actual results to differ from anticipated
results. The forward-looking statements are based on our current
expectations and what we believe are reasonable assumptions given our
knowledge of the markets; however, our actual performance, results and
achievements could differ materially from those expressed in, or implied
by, these forward-looking statements.

Our fiscal year ends on December 31. References to a fiscal year refer to
the calendar year in which such fiscal year ends.

OVERVIEW

The Company was organized in the State of New York, August 24, 1989.  Its
objective is to provide scheduled air transportation from the U.S. to
Russia, and former Soviet Union countries. In 1991, the Department of
Transportation (DOT) granted the Company routes to provide non-stop
passenger, cargo and mail service from JFK to St. Petersburg and from JFK
to Riga, with online service to Minsk, Kiev and Tbilisi as well as back
up service to Moscow.  For lack of sufficient working capital, the US
Department of Transportation terminated the Company's route authority
without prejudice to reapply when financing was in hand.  Since such
time, Baltia has engaged in market research, operations development and
planning, as well as activities to raise requisite funding in order to
reapply with the US Department of Transportation. These costs are borne
by Baltia shareholders and principals.

With the exception of the JFK - Moscow route, there exists no nonstop
competitive air transportation service on the routes for which Baltia can
reapply pending financing.  Baltia intends to supply full service, i.e.
passenger, cargo and mail, and will
not be dependent upon one or a few major customers. Baltia has two
registered trademarks "BALTIA" and "VOYAGER CLASS" and five trademarks
subject to registration.

The accompanying consolidated financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.  The
Company's starting revenue operations is dependent upon its timely
procuring significant external debt and/or equity financing to fund its
immediate and nearer-term operations, and subsequently realizing
operating cash flows from ticket sales sufficient to sustain its longer-
term operations and growth initiatives.

PLAN OF OPERATION

We do not currently have sufficient capital to commence revenue flight
operations and must rely on additional sources of financing in order to
maintain our current level of operations. During 2006 and into 2007 we
continued to finance our operations through the issuance of our common
stock. Until revenue operations begin, our monthly expenditures for
administrative and regulatory compliance can be controlled at about
$2,500-$5,000. Based on current reserves we have sufficient capital to
support our development stage operations through the end of 2007.

In 2007 we plan to raise $1.5 to $2 mm in additional financing in order
to start revenue flight operations. Based on our prior experience with
certification and current preparations the management believes that the
launch budget, previously reviewed by the DOT, will be adequate to
complete certification and to commence flight service. Approximately
$500,000 is budgeted for aircraft, $450,000 for certification tasks, and
$300,000 for general and administrative expenses. At the time flight
service is inaugurated the Company plans to have approximately 15
management and 45 staff personnel.

Management has considered the overall pipeline effect that enhances the
initial cash position of a startup carrier. It is the industry practice
for passengers to purchase tickets in advance of their flights while
service vendors bill the carrier later.

In order that a new airline would not fly empty on day one, approximately
30 days prior to the expected inaugural date the DOT authorizes sales of
tickets and cargo. Such funds from advance sales, estimated at
approximately $3 mm for the company, accumulate in an escrow account, and
are released upon the issuance of the air carrier certificate.

There can be no assurance that additional financing will be available on
terms favorable to us or at all. If adequate funds are not available or
are not available
on acceptable terms, we may not be able to fund operations.







CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of
operations
are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the U.S. The
preparation of our financial statements requires us to make certain
estimates, judgments and assumptions
that affect the reported amounts of assets and liabilities at the date of
the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Our estimates,
judgments and assumptions are continually re-evaluated based upon
available information and experience. Because of the use
of estimates inherent in the financial reporting process, actual results
could differ from those estimates. Areas in which significant judgment
and estimates are used include, but are not limited to valuation of long
lives assets and deferred income taxes.

Valuation of Long-Lived Assets:  We review the recoverability of our
long-lived assets, including buildings, equipment and intangible assets,
when events or changes in circumstances occur that indicate that the
carrying value of the asset may not be recoverable. The assessment of
possible impairment is based on our ability to recover the carrying value
of the asset from the expected future pre-tax cash flows (undiscounted
and without interest charges) of the related operations. If these cash
flows are less than the carrying value of such asset, an impairment loss
is recognized for the difference between estimated fair value and
carrying value. Our primary measure of fair value is based on discounted
cash flows. The measurement of impairment requires management to make
estimates of these cash flows related to long-lived assets, as well as
other fair value determinations.

We amortize the costs of other intangibles (excluding goodwill) over
their estimated useful lives unless such lives are deemed indefinite.
Amortizable intangible assets are tested for impairment based on
undiscounted cash flows and, if impaired, written down to fair value
based on either discounted cash flows or appraised values.  Intangible
assets with indefinite lives are tested for impairment, at least
annually, and written down to fair value as required.

Stock-Based Compensation Plans: Stock-based awards to non-employees are
accounted for using the fair value method in accordance with SFAS
No. 123(R), Accounting for Stock-Based Compensation, and EITF Issue
No. 96-18, Accounting for Equity Instruments that are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling Goods or
Services.
On January 1, 2006, we adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") 123R, "Share-Based Payment" ("SFAS
123(R)"), which requires that companies measure and recognize
compensation expense at an amount equal to the fair value of share-based
payments granted under compensation arrangements. Prior to January 1,
2006, we accounted for our stock-based compensation plans under the
recognition and measurement principles of Accounting Principles Board
("APB") Opinion 25, "Accounting for Stock Issued to Employees," and
related interpretations, and would typically recognize no compensation
expense for stock option grants if options granted had an exercise price
equal to the market value of the underlying common stock on the date of
grant.

We adopted SFAS 123(R) using the "modified prospective" method, which
results in no restatement of prior period amounts. Under this method, the
provisions of SFAS 123(R) apply to all awards granted or modified after
the date of adoption. In addition, compensation expense must be
recognized for any unvested stock option awards outstanding as of the
date of adoption on a straight-line basis over the remaining vesting
period. We calculate the fair value of options using a Black-Scholes
option pricing model. We do not currently have any outstanding options
subject to future vesting. SFAS 123(R) also requires the benefits of tax
deductions in excess of recognized compensation expense to be reported in
the Statement of Cash Flows as a financing cash inflow rather than an
operating cash inflow. In addition, SFAS 123(R) required a modification
to the Company's calculation of the dilutive effect of stock option
awards on earnings per share. For companies that adopt SFAS 123(R) using
the "modified prospective" method, disclosure of pro forma information
for periods prior to adoption must continue to be made. In computing fair
value we used the following assumptions:

Year Interest Rate  Dividend Yield   Expected Volatility   Expected  Life
2006    5.15%          0.0%                75.0%             60 mos.

Income Taxes: We must make certain estimates and judgments in determining
income tax expense for financial statement purposes. These estimates and
judgments occur in the calculation of certain tax assets and liabilities,
which arise from differences in the timing of recognition of revenue and
expense for tax and financial statement purposes.

Deferred income taxes are recorded in accordance with SFAS No. 109,
"Accounting for Income Taxes," or SFAS 109. Under SFAS No. 109, deferred
tax assets and liabilities are determined based on the differences
between financial reporting and the tax basis of assets and liabilities
using the tax rates and laws in effect when the differences are expected
to reverse. SFAS 109 provides for the recognition of deferred tax assets
if realization of such assets is more likely than not to occur.
Realization of our net deferred tax assets is dependent upon our
generating sufficient taxable income in future years in appropriate tax
jurisdictions to realize benefit from the reversal of temporary
differences and from net operating loss, or NOL, carryforwards.

We have determined it more likely than not that these timing differences
will not materialize and have provided a valuation allowance against
substantially all of our net deferred tax asset. Management will continue
to evaluate the realizability of the deferred tax asset and its related
valuation allowance. If our assessment of the deferred tax assets or the
corresponding valuation allowance were to change, we would record the
related adjustment to income during the period in which we make the
determination. Our tax rate may also vary based on our results and the
mix of income or loss in domestic and foreign tax jurisdictions in which
we operate.

In addition, the calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We recognize
liabilities for anticipated tax audit issues in the U.S. and other tax
jurisdictions based on our estimate of whether, and to the extent to
which, additional taxes will be due. If we ultimately determine that
payment of these amounts is unnecessary, we will reverse the liability
and recognize a tax benefit during the period in which we determine that
the liability is no longer necessary. We will record an additional charge
in our provision for taxes in the period in which we determine that the
recorded tax liability is less than we expect the ultimate assessment to
be.

RESULTS OF OPERATIONS

We had no revenues during the fiscal years ended December 31, 2006 and
2005 because we do not fly any aircraft and cannot sell tickets.

Our general and administrative expenses increased $493,750 to $1,208,298
during fiscal year ended December 31, 2006 as compared to $714,548 during
the fiscal year ended December 31, 2005. This increase is mainly the
result of increased activity in preparing for air carrier certification.

Primarily as a result of the foregoing, we incurred a net loss of
$1,208,680 during the fiscal year ended December 31, 2006 as compared to
a net loss of $721,114 during the fiscal year ended December 31, 2005.

Our future ability to achieve profitability in any given future fiscal
period remains highly contingent upon us beginning flight operations. Our
ability to realize revenue from flight operations in any given future
fiscal period remains highly contingent upon us obtaining significant
equity infusions and/or long-term debt financing sufficient to fund
leasing and operating a Boeing 747. Even if we were to be successful in
procuring such funding, there can be no assurance that we will be
successful in commencing revenue operations or, if commenced, that such
operations would be profitable.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have incurred substantial operating and net
losses, as well as negative operating cash flows. As of December 31,
2006, our working capital was $2,985 and our stockholders' equity was
$5,514. This reflects a decrease from December 31, 2005 when our working
capital was $13,747 and our stockholders' equity was $15,858. We had
unrestricted cash balance of $4,185 at December 31, 2006, as compared to
$14,947 at December 31, 2005.

Our operating activities utilized $121,171 in cash during the fiscal year
ended December 31, 2006, a decrease of $73,089 from the $194,260 in cash
utilized during the fiscal year ended December 31, 2005.

Our financing activities provided $11,209 and $175,444 in cash during the
fiscal year ended December 31, 2006 and 2005, respectively.

As a result of the foregoing, our unrestricted cash decreased by $10,762
to $4,185 at December 31, 2006, as compared to $14,947 at December 31,
2005.

We had no significant planned capital expenditures, budgeted or
otherwise, as of December 31, 2006.

Off-Balance Sheet Arrangements: We do not have any off-balance
sheet arrangements which have, or are reasonably likely to have,
an effect on our financial condition, financial statements,
revenues or expenses.



Item 7. Financial Statements.

BALTIA AIR LINES, INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Michael F. Cronin
Certified Public Accountant
687 Lee Road
Rochester, NY 14606

Board of Directors and Shareholders
Baltia Air Lines, Inc.
New York, NY

I have audited the accompanying balance sheet of Baltia Air Lines, Inc.
(the "Company") as of December 31, 2006 and December 31, 2005 and the
related statements of operations, stockholders' equity and cash flows for
the years then ended. The financial statements are the responsibility of
the directors. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with standards established by the
Public Company Accounting Oversight Board (United States). Those
standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. The company is not required to have, nor was I engaged to
perform, an audit of its internal control over financial reporting. My
audit included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting.
Accordingly, I express no such opinion. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. I believe that
my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Baltia Air Lines,
Inc.  as of December 31, 2006 and December 31, 2005 and the results of
its operations, its cash flows and changes in stockholders' equity for
the years then ended in conformity with accounting principles generally
accepted in the United States.

The Company has incurred operating losses since inception and does not
currently have sufficient capital to commence revenue flight operations.
Note 7 of the financial statements addresses Management's Plan regarding
the future operations of the Company.

Also discussed in the notes and effective January 1, 2006, the Company
adopted the provisions of Statement of Financial Accounting Standards No.
123 (Revised 2004), Share-Based Payment.

March 29, 2007
/s/ Michael F. Cronin

Michael F. Cronin
Certified Public Accountant

March 29, 2007

<PAGE>
<TABLE>
<CAPTION>



 Baltia Air Lines, Inc.
 Balance Sheets
 (A Development Stage Company)

                                              12/31/2006     12/31/2005
           Assets
<S>                                         <C>            <C>
Current Assets
Cash                                         $      4,185   $  14,947

Property & Equipment:
Equipment                                          63,264      62,464
Accumulated Depreciation                          (60,735)    (60,353)
  Net Property & Equipment                          2,529       2,111

Total Assets                                    $   6,714   $  17,058

Liabilities & Equity

Current Liabilities:
Accounts Payable                                $   1,200    $  1,200

Equity:
Preferred stock - 2,000,000
  authorized $0.01 par value
  66,500 issued & outstanding                         665         665

Common Stock - 200,000,000
  authorized $0.0001 par value
  122,394,109 issued & outstanding
  (67,298,009 in 2005)                             12,239       6,730

Additional paid in capital                     10,486,192   9,293,365

Deficit Accumulated During
  Development Stage                           (10,493,582) (9,284,902)

Total Equity                                   $    5,514  $   15,858

Total Liabilities & Equity                     $    6,714  $   17,058

See Summary of Significant Accounting Policies and Notes to Financial
Statements.
</TABLE>



<PAGE>
<TABLE>
<CAPTION>
Baltia Air Lines, Inc.
Statements of Operations
(A Development Stage Company)

                                                   Years Ended            Inception to
                                            12/31/2006     12/31/2005       12/31/2006
<S>                                     <C>               <C>              <C>
Revenue                                  $            0    $          0     $          0

Costs & Expenses
 General & administrative                     1,208,298         714,548        8,118,852
 FAA certification costs                              0               0          206,633
 Training                                             0               0          225,637
 Depreciation                                       382           6,566          306,408
 Other                                                0               0          568,245
 Interest                                             0               0        1,066,659
   Total Costs & Expenses                     1,208,680         721,114       10,492,434

Loss before income taxes                     (1,208,680)       (721,114)     (10,492,434)

Income Taxes                                          0               0            1,148

Deficit Accumulated During
        Development Stage                 $  (1,208,680)    $  (721,114)    $(10,493,582)

Per share amounts:
Basic:
  Loss                                           ($0.01)         ($0.01)
  Weighted Average                           86,475,527      63,771,434

See Summary of Significant Accounting Policies and Notes to Financial Statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Baltia Air Lines, Inc.
Statements of Cash Flows
(A Development Stage Company)

                                                         Years Ended                  Inception to
                                                         12/31/2006     12/31/2005    12/31/2006
<S>                                                     <C>            <C>            <C>
Cash flows from operating activities:
Deficit Accumulated During Development Stage             $(1,208,680)   $ (721,114)   $(10,493,582)
Adjustments required to reconcile deficit accumulated
  during development stage to cash used in operating
  activities:
Depreciation                                                     382         6,566         306,408
Expenses paid by issuance of common stock                  1,087,127       522,772       1,740,751
(Increase) decrease in prepaid expenses                            0             0         400,301


Increase (decrease) in accounts payable & accrued expenses         0         2,484       3,152,681
   Cash flows used by operating activities:                 (121,171)     (194,260)     (4,893,441)

Cash flows from investing activities:
Purchase of equipment                                           (800)       (2,273)       (312,139)
Deposit on airplane lease                                          0             0               0
   Cash used in investing activities                            (800)       (2,273)       (312,139)

Cash flows from financing activities:
Proceeds from issuance of common stock                       111,209       175,444       4,724,429
Proceeds from issuance of preferred stock                          0             0           2,753
Loans from related parties                                         0             0       1,351,573
Repayment of related party loans                                   0             0        (368,890)
Acquisition of treasury stock                                      0             0        (500,100)
 Cash generated by financing activities                      111,209       175,444       5,209,765

Change in cash                                               (10,762)      (21,089)          4,185
Cash-beginning of period                                      14,947        36,036               0
Cash-end of period                                          $  4,185    $   14,947    $     17,220

See Summary of Significant Accounting Policies and Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


Baltia Air Lines, Inc.
Statements of Shareholders' Equity
(A Development Stage Company)
                                            Preferred                       Common               Deficit
                                                                                               Accumulated
                                                                         Common  Additional      During
                                                Par                      Stock     Paid-In     Development
                                      Shares   Value        Shares       Amount    Capital        Stage
<S>                               <C>       <C>      <C>           <C>        <C>            <C>
Balance at December 31, 2001         275,250 $ 2,753   48,679,757   $ 4,868    $ 8,138,593    $ 8,049,149)
Contribution of Additional Capital                                                  12,877
Net Loss                                                                                          (76,106)
Balance at December 31, 2002         275,250   2,753   48,679,757     4,868      8,151,470      (8,125,255)

Exercise of Warrants and Options                        2,934,662       293         86,906
Stock issued for cash                                     696,428        70         50,442
Stock issued for services                                (145,000)      (15)           417
Eliminated Treasury Stock Account                                                     (100)
Correct error in Preferred Stock    (208,750) (2,088)                                2,088
Net Loss                                                                                          (100,906)
Balance at December 31, 2003          66,500     665   52,165,847     5,217      8,291,223      (8,226,161)

Exercise of Warrants and Options                        3,771,162       377         36,082
Shares issued for services                              4,600,000       460        201,547
Shares issued to correct
                previous error                            408,000        41         66,909
Shares issued to correct
                previous errors                            75,000         8             (8)
Cancellation of shares issued
                in error                               (1,370,000)     (137)           137
Net Loss                                                                                           (337,627)
Balance at December 31, 2004          66,500     665   59,650 009      5,965     8,595,914       (8,563,788)

Exercise of Warrants and Options                          210,000        21            189
Shares issued for cash                                    500,000        50        175,184
Shares issued for services                              6,938,000       694        522,078
Net Loss                                                                                          (721,114)
Balance at December 31, 2005          66,500     665   67,298,009     6,730      9,293,365      (9,284,902)

Exercise of Warrants and Options                       22,000,000     2,200          9,000
Shares issued for cash                                 13,550,000     1,355         98,655
Shares issued for services                             19,546,900     1,955        941,213
Net Loss                                                                                        (1,208,680)
Balance at December 31, 2006          66,500     665  122,394,909    12,240     10,486,192     (10,493,582)

See Summary of Significant Accounting Policies and Notes to Financial Statements
</TABLE>





<PAGE>
BALTIA AIR LINES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 2006

Basis of Presentation: The financial statements have been presented in a
"development stage" format. Since inception, our primary activities have
been raising of capital, obtaining financing and of obtaining route
authority and approval from the DOT and the FAA. We have not commenced our
principal revenue producing activities.

Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires our management to
make estimates and assumptions that affect reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statement and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from the
estimates.

Cash and Cash Equivalents: For financial statement presentation purposes,
we consider those short-term, highly liquid investments with original
maturities of three months or less to be cash or cash equivalents.

Fair Value of Financial Instruments: Statements of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial
Instruments," requires disclosure of fair value information about
financial instruments. Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to
management as of December 31, 2006. The respective carrying value of
certain on-balance sheet financial instruments approximated their fair
values.

These financial instruments include cash and cash equivalents, accounts
payable and accrued expenses. Fair values were assumed to approximate
carrying values for these financial instruments since they are short-term
in nature and their carrying amounts approximate fair values or they are
receivable or payable on demand. The carrying value approximates the fair
value of the notes payable

Property and Equipment: Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally 5-7 years. Expenditures for renewals
and betterments are capitalized. Expenditures for minor items, repairs and
maintenance are charged to operations as incurred. Gain or loss upon sale
or retirement due to obsolescence is reflected in the operating results in
the period the event takes place.

Valuation of Long-Lived Assets: We review the recoverability of our long-
lived assets, including buildings, equipment and intangible assets, when
events or changes in circumstances occur that indicate that the carrying
value of the asset may not be recoverable. The assessment of possible
impairment is based on our ability to recover the carrying value of the
asset from the expected future pre-tax cash flows (undiscounted and
without interest charges) of the related operations. If these cash flows
are less than the carrying value of such asset, an impairment loss is
recognized for the difference between estimated fair value and carrying
value. Our primary measure of fair value is based on discounted cash
flows. The measurement of impairment requires management to make estimates
of these cash flows related to long-lived assets, as well as other fair
value determinations.

We amortize the costs of other intangibles (excluding goodwill) over their
estimated useful lives unless such lives are deemed indefinite.
Amortizable intangible assets are tested for impairment based on
undiscounted cash flows and, if impaired, written down to fair value based
on either discounted cash flows or appraised values.  Intangible assets
with indefinite lives are tested for impairment, at least annually, and
written down to fair value as required.

Comprehensive Income: Comprehensive income is defined as changes in the
equity of an enterprise except those resulting from shareholder
transactions. The amounts shown on our consolidated statement of
stockholders' equity relate to the cumulative effect of minimum pension
liabilities, translation adjustments, and unrealized gain or loss on
securities.

Stock-Based Compensation Plans: Stock-based awards to non-employees are
accounted for using the fair value method in accordance with SFAS
No. 123(R), Accounting for Stock-Based Compensation, and EITF Issue
No. 96-18, Accounting for Equity Instruments that are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services.

On January 1, 2006, we adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") 123R, "Share-Based Payment" ("SFAS 123(R)"),
which requires that companies measure and recognize compensation expense
at an amount equal to the fair value of share-based payments granted under
compensation arrangements. Prior to January 1, 2006, we accounted for our
stock-based compensation plans under the recognition and measurement
principles of Accounting Principles Board ("APB") Opinion 25, "Accounting
for Stock Issued to Employees," and related interpretations, and would
typically recognize no compensation expense for stock option grants if
options granted had an exercise price equal to the market value of the
underlying common stock on the date of grant.

We adopted SFAS 123(R) using the "modified prospective" method, which
results in no restatement of prior period amounts. Under this method, the
provisions of SFAS 123(R) apply to all awards granted or modified after
the date of adoption. In addition, compensation expense must be recognized
for any unvested stock option awards outstanding as of the date of
adoption on a straight-line basis over the remaining vesting period. We
calculate the fair value of options using a Black-Scholes option pricing
model. We do not currently have any outstanding options subject to future
vesting. SFAS 123(R) also requires the benefits of tax deductions in
excess of recognized compensation expense to be reported in the Statement
of Cash Flows as a financing cash inflow rather than an operating cash
inflow. In addition, SFAS 123(R) required a modification to the Company's
calculation of the dilutive effect of stock option awards on earnings per
share. For companies that adopt SFAS 123(R) using the "modified
prospective" method, disclosure of pro forma information for periods prior
to adoption must continue to be made. In computing fair value we used the
following assumptions:

Year    Interest Rate  Dividend Yield   Expected Volatility  Expected Life
2006        5.15%           0.0%               75.0%           60 mos.


Accounting For Obligations And Instruments Potentially To Be Settled In
The Company's Own Stock We account for obligations and instruments
potentially to be settled in the Company's stock in accordance with EITF
Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed
To, and Potentially Settled In a Company's Own Stock. This issue addresses
the initial balance sheet classification and measurement of contracts that
are indexed to, and potentially settled in, the Company's own stock.
Under EITF Issue No. 00-19 contracts are initially classified as equity or
as either assets or liabilities, in the following situations:

Equity

Contracts that require physical settlement or net-share settlement; and
Contracts that give the company a choice of net-cash settlement or
settlement in its own shares (physical settlement or net-share
settlement), assuming that all the criteria for equity classification have
been met.

Assets or Liabilities

Contracts that require net-cash settlement (including a requirement to
net-cash settle the contract if an event occurs and if that event is
outside the control of the company); and
Contracts that give the counterparty a choice of net-cash settlement or
settlement in shares (physical settlement or net-share settlement).

All contracts are initially measured at fair value and subsequently
accounted for based on the current classification. Contracts initially
classified as equity do not recognize subsequent changes in fair value as
long as the contracts continue to be classified as equity. For contracts
classified as assets or liabilities, the Company reports changes in fair
value in earnings and discloses these changes in the financial statements
as long as the contracts remain classified as assets or liabilities. If
contracts classified as assets or liabilities are ultimately settled in
shares, any previously reported gains or losses on those contracts
continue to be included in earnings. The classification of a contract is
reassessed at each balance sheet date.

In accordance with EITF Issue No. 00-19, a transaction which includes a
potential for net-cash settlement, including liquidated damages, requires
that derivative financial instruments, including warrants and additional
investment rights, initially be recorded at fair value as an asset or
liability and subsequent changes in fair value be reflected in the
statement of operations. The recorded value of the liability for such
derivatives can fluctuate significantly based on fluctuations in the
market value of the underlying common stock of the issuer of the
derivative instruments, as well as in the volatility of the stock price
during the term used for observation and the remaining term.

Warrant Derivative Liabilities: We account for warrants issued in
connection with financing arrangements in accordance with EITF Issue No.
00-19, Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock. Pursuant to EITF Issue No.
00-19, an evaluation of specifically identified conditions is made to
determine whether the fair value of warrants issued is required be
classified as a derivative liability. The fair value of warrants
classified as derivative liabilities is adjusted for changes in fair value
at each reporting period, and the corresponding non-cash gain or loss is
recorded in current period earnings

Earnings per Common Share: Basic earnings per share is computed by
dividing income available to common shareholders (the numerator) by the
weighted-average number of common shares outstanding (the denominator) for
the period. Diluted earnings per share assumes that any dilutive
convertible securities outstanding were converted, with related preferred
stock dividend requirements and outstanding common shares adjusted
accordingly. It also assumes that outstanding common shares were increased
by shares issuable upon exercise of those stock options for which market
price exceeds the exercise price, less shares which could have been
purchased by us with the related proceeds. In periods of losses, diluted
loss per share is computed on the same basis as basic loss per share as
the inclusion of any other potential shares outstanding would be anti-
dilutive.

If we had generated earnings during the year ended December 31, 2006, we
would have added 36,060,048 common equivalent shares to the weighted
average shares outstanding to compute the diluted weighted average shares
outstanding (39,939,500 in 2005).
<TABLE>


                                     2006                     2005
<S>                        <C>                     <C>
Numerator-Net Loss             ($1,208,680)                 ($721,114)

Denominator:
Weighted average-Basic          86,475,527                 63,771,434

Assumed conversion of
warrants                        35,860,548                 39,740,000

Assumed conversion of
preferred stock                    199,500                    199,500

Denominator-diluted            122,535,575                103,710,934

Per share:
   Net Loss-basic                    Nil                         Nil
   Net Loss-diluted                  Nil                         Nil

</TABLE>

Income Taxes: We must make certain estimates and judgments in determining
income tax expense for financial statement purposes. These estimates and
judgments occur in the calculation of certain tax assets and liabilities,
which arise from differences in the timing of recognition of revenue and
expense for tax and financial statement purposes.

Deferred income taxes are recorded in accordance with SFAS No. 109,
"Accounting for Income Taxes," or SFAS 109. Under SFAS No. 109, deferred
tax assets and liabilities are determined based on the differences between
financial reporting and the tax basis of assets and liabilities using the
tax rates and laws in effect when the differences are expected to reverse.
SFAS 109 provides for the recognition of deferred tax assets if
realization of such assets is more likely than not to occur. Realization
of our net deferred tax assets is dependent upon our generating sufficient
taxable income in future years in appropriate tax jurisdictions to realize
benefit from the reversal of temporary differences and from net operating
loss, or NOL, carryforwards.

We have determined it more likely than not that these timing differences
will not materialize and have provided a valuation allowance against
substantially all of our net deferred tax asset. Management will continue
to evaluate the realizability of the deferred tax asset and its related
valuation allowance. If our assessment of the deferred tax assets or the
corresponding valuation allowance were to change, we would record the
related adjustment to income during the period in which we make the
determination. Our tax rate may also vary based on our results and the mix
of income or loss in domestic and foreign tax jurisdictions in which we
operate.

In addition, the calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We recognize
liabilities for anticipated tax audit issues in the U.S. and other tax
jurisdictions based on our estimate of whether, and to the extent to
which, additional taxes will be due. If we ultimately determine that
payment of these amounts is unnecessary, we will reverse the liability and
recognize a tax benefit during the period in which we determine that the
liability is no longer necessary. We will record an additional charge in
our provision for taxes in the period in which we determine that the
recorded tax liability is less than we expect the ultimate assessment to
be.

Recent Accounting Pronouncements:

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(SFAS 157). SFAS 157 provides guidance for using fair value to measure
assets and liabilities. It also responds to investors' requests for
expanded information about the extent to which companies measure assets
and liabilities at fair value, the information used to measure fair value,
and the effect of fair value measurements on earnings. SFAS 157 applies
whenever other standards required (or permit) assets or liabilities to be
measured at fair value, and does not expand the use of fair value in any
new circumstances. SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007. We are currently
evaluating the effect that the adoption of SFAS 157 will have on our
results of operations and financial condition and are not yet in a
position to determine such effects.

In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108
establishes an approach that requires quantification of financial
statement misstatements based on the effects of the misstatements on each
of the Company's consolidated financial statements and the related
financial statement disclosures. SAB 108 is effective for the year ending
December 31, 2006. We are currently evaluating the effect that the
adoption of SFAS 157 will have on our results of operations and financial
condition.

 In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes-an Interpretation of FASB Statement 109 ("FIN
48"), which clarifies the accounting for uncertain tax positions. This
Interpretation allows the tax effects from an uncertain tax position to be
recognized in the Company's financial statements if the position is more
likely than not to be sustained upon audit, based on the technical merits
of the position. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning
after December 15, 2006. We do not expect the adoption of FIN 48 to have a
material impact on our financial statements.

In May 2006, the FASB issued "SFAS No. 154", "Accounting Changes and Error
Corrections", which replaces APB Opinion No. 20 "Accounting Changes" and
FASB Statement No. 3 "Reporting Accounting Changes in Interim Financial
Statements". SFAS No. 154 changes the requirements for the accounting and
reporting of a change in an accounting principle. SFAS No. 154 requires
retrospective application for voluntary changes in an accounting principle
unless it is impracticable to do so. SFAS No. 154 is effective for
accounting changes made in fiscal years beginning after December 15, 2006.
We adopted SFAS No. 154 on January 1, 2006 with no expected material
effect on our financial statements.

<PAGE>


BALTIA AIR LINES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006

Note 1. Organization and Operations

The Company was formed as a U.S. airline on August 24, 1989 in the State
of New York. Our objective is to provide scheduled air transportation from
the U.S. to Russia, the Baltic States and Ukraine.  In 1991, the
Department of Transportation (DOT) granted the Company routes to provide
non-stop passenger, cargo and mail service from JFK to St. Petersburg and
from JFK to Riga, with online service to Minsk, Kiev and Tbilisi as well
as back up service to Moscow. We have two registered trademarks "BALTIA"
and "VOYAGER CLASS," and five trademarks subject to registration. Our
activities to date have been devoted principally to raising capital,
obtaining route authority and approval from the DOT and the FAA, training
crews, and conducting market research to develop the Company's marketing
strategy.

Regulatory Compliance
We intend to operate as a Part 121 carrier, a heavy jet operator.  As
such, following certification we will be required to maintain our air
carrier standards as prescribed by DOT and FAA regulation and as specified
in the FAA approved Company manuals.  As part of its regulatory compliance
we will be required to submit periodic reports of our operations to the
DOT.

Note 2. Property and Equipment

A summary of property & equipment is as follows:


                       Estimated useful life        2006           2005

Operations manuals        5-7 years              $28,109        $28,109
Office equipment          5-7 years               35,155         34,355
Less accumulated
depreciation                                     (60,735)       (60,353)

Net                                               $2,529         $2,111

Depreciation expense                                $382         $6,566


Note 3. Stockholders' Equity

Description of Securities

Common Stock: We have been authorized 200,000,000 shares of Common Stock
at $.0001 par value per share. As of December 31, 2006, a total of
122,394,909 shares of Common Stock were issued and outstanding and held by
over 100 shareholders. In addition, we have granted warrants to issue up
to 26,990,000 more shares of our common stock. Holders of Common Stock are
entitled to receive dividends, when and if declared by the board of
directors, subject to prior rights of holders of any Preferred Stock then
outstanding and to share ratably in the net assets of the company upon
liquidation.  Holders of Common Stock do not have preemptive or other
rights to subscribe for additional shares. The Certificate of
Incorporation does not provide for cumulative voting.  Shares of Common
Stock have equal voting, dividend, liquidation and other rights, and have
no preference, exchange or appraisal rights.


Preferred Stock:  We are authorized to issue up to a maximum of 2 million
shares (66,500 shares outstanding) of Preferred   Stock.  We can issue
these shares as our board of directors shall from time to time fix by
resolution. Our Preferred Stock is not entitled to share in any dividends
declared on the Common Stock and has no voting rights. Each share is
convertible in to 3 shares of Common. The liquidation preference is set by
this conversion formula and results in a pro rata claim on the Company's
assets based upon the underlying common shares issuable (199,500) upon
conversion.

Recent Issuance of Unregistered Securities

2006:

Stock Issued for Cash
We issued 13,550,000 shares of our common stock in exchange for receiving
a total of $99,410 in cash.  The shares are not registered and subject to
restrictions as to transferability.

Stock Issued for Services
We issued 19,546,900 shares of our common stock in exchange for services.
The shares were valued at $943,168 or about $0.05 per share which
reflected the weighted average market value at the time of issuance. The
shares are not registered and are subject to restrictions as to
transferability. We also issued 75,000 shares to correct a prior issuance
and cancelled 1,370,000 shares issued in error in a previous fiscal year.

Stock Issued Due to Exercise of Warrants & Options
During 2006 holders of 22,000,000 warrants, registered in our 1999
registration statement, exercised their option to acquire a like amount of
shares of Common Stock. The options were at various exercise prices and
resulted in proceeds of $ 11,200.

2005:

Stock Issued for Cash
We issued 500,000 shares of our common stock in exchange for receiving a
total of $87,140 in cash and collected approximately $90,000 in
subscriptions receivable.  The shares are not registered and subject to
restrictions as to transferability.

Stock Issued for Services
We issued 6,938,000 shares of our common stock in exchange for services.
The shares were valued at $522,772 or about $0.08 per share which
reflected the weighted average market value at the time of issuance. The
shares are not registered and are subject to restrictions as to
transferability.

Summary of Option Activity

The following table provides summary information on the various warrants
issued by our company in private placement transactions and unapproved
equity compensation plans; the warrants exercised to date; the warrants
that are presently exercisable and the current exercise prices of such
warrants.


<TABLE>

                                          2006                         2005

                                        Weighted average                    Weighted average
                            Shares      exercise price      shares          exercise price
<S>                   <C>               <C>             <C>               <C>
Shares outstanding
January 1                39,990,000        $0.0009          39,740,000        $0.0001

Granted during
year                      9,000,000        $0.2500             250,000        $0.25

Exercised               (22,000,000)       $0.0001                   0        $0.0001

Lapsed                            0        $0.0000                   0        $0.00

Outstanding at
December 31              26,990,000        $0.0846          39,990,000        $0.0009

<S>                                     <C>                               <C>
Weighted average months
remaining                                   34.8                               37.4
</TABLE>


The following table summarizes the status of the Company's
aggregate stock options as of December 31, 2006:

<TABLE>

                           Options Outstanding                                      Options Exercisable

Grantee                     Shares     Weighted average    Weighted average           Shares   Weighted average
                                       exercise price       exercise price                       exercise price
                                                            remaining life
                                                              in months

<S>                     <C>              <C>               <C>               <C>                <C>
Management &
Directors                 25,150,000        $0.09               35.8                        0           n/a
Other                      1,840,000         Nil                20.7                1,840,000          $0.03
Total Shares              26,990,000                                                1,840,000

(1) exercise price below one cent
<S>                               <C>
Intrinsic Value                      $335,286
</TABLE>



We granted 9,000,000 options in 2006 with a fair value of $0.0156 per
share. The outstanding options of 25,150,000 granted to management vest
upon the completion of the first revenue flight.

Note 4. Income Taxes

The Company has approximately $ 8,900,000 in net operating loss carryovers
available to reduce future income taxes. These carryovers expire at
various dates through the year 2027. The Company has adopted SFAS 109
which provides for the recognition of a deferred tax asset based upon the
value the loss carry-forwards will have to reduce future income taxes and
management's estimate of the probability of the realization of these tax
benefits. We have determined it more likely than not that these timing
differences will not materialize and have provided a valuation allowance
against substantially all of our net deferred tax asset. A summary of the
deferred tax asset presented on the accompanying balance sheets is as
follows:

                                               2006                   2005
The provision (benefit) for income taxes
consists of the following:

  Currently payable:
     Federal                                     $0                       $0
     State                                      325                      325
Total currently payable                         325                      325

  Deferred:
     Federal                                390,404                  232,920
     State                                   60,434                   36,056
Total deferred                              450,838                  268,976
Less increase in allowance                 (450,838)                (268,976)
Net deferred                                      0                        0
Total income tax provision (benefit)           $325                     $325


                                               2006                   2005
Individual components of deferred taxes
are as follows:

Deferred tax asset arising from net
operating loss carry forwards             $4,055,409              $3,604,571
Less deferred tax allowance               (4,055,409)             (3,604,571)
Net Deferred Income Taxes                         $0                      $0


Utilization of federal and state NOL and tax credit carryforwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as amended, and
similar state provisions. The annual limitation may result in the
expiration of NOL and tax credit carryforwards before full utilization.

Note 5. Commitments and Contingencies

Facilities: The Company leases its office space for its administrative
offices, under a month to month agreement, at a monthly rental of
approximately $900.

Note 6. Supplementary Cash Flow Disclosure:

                                             2005       2004

Equity instruments issued for services:   $1,087,127    $522,772

Note 7. Management's Plan of Operation

We do not currently have sufficient capital to commence revenue flight
operations and must rely on additional sources of financing in order to
maintain our current level of operations. During 2006 and into 2007 we
continued to finance our operations through the issuance of our common
stock and the continued exercise of warrants associated with our 1999
public offering. Until revenue operations begin, our monthly expenditures
for administrative and regulatory compliance can be controlled at about
$1,500-$2,000. Based on current reserves we have sufficient capital to
support our development stage operations through the end of 2007.

In 2007 we plan to raise $1.5 to $2.0 mm in a private placement in order
to start revenue flight operations.  Based on our prior experience with
certification and current preparations the management believes that the
launch budget, previously reviewed by the DOT, will be adequate to
complete certification and to commence flight service. Approximately
$500,000 is budgeted for aircraft, $450,000 for certification tasks, and
$300,000 for general and administrative expenses. At the time flight
service is inaugurated the company plans to have approximately 15
management and 45 staff personnel.

Management has considered the overall pipeline effect that enhances the
initial cash position of a startup carrier. It is the industry practice
for passengers to purchase tickets in advance of their flights while
service vendors bill the carrier later.

In order that a new airline would not fly empty on day one, approximately
30 days prior to the expected inaugural date the DOT authorizes sales of
tickets and cargo. Such funds from advance sales, estimated at
approximately $3 mm for the company, accumulate in an escrow account, and
are released upon the issuance of the air carrier certificate.

There can be no assurance that additional financing will be available on
terms favorable to us or at all.  If adequate funds are not available or
are not available on acceptable terms, we may not be able to fund
expansion.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

ITEM 8A   CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we conducted an
evaluation under the supervision and with the participation of our chief
executive officer and chief financial officer of our disclosure controls
and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the
Exchange Act). Based upon this evaluation, our chief executive officer and
chief financial officer concluded that our disclosure controls and
procedures are effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission's rules and forms. There was no change
in our internal controls or in other factors that could affect these
controls during our last fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over
financial reporting. While existing controls may be adequate at present,
upon the commencement of flight revenue service we intend to implement
controls appropriate for airline operations.

ITEM 8B  OTHER INFORMATION.

None.

PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
          CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH
SECTION 16(a)
          OF THE EXCHANGE ACT

MANAGEMENT

Executive Officers and Directors

<TABLE>
<CAPTION>
The following table summarizes certain information with respect
to the executive officers and directors of the board <FN1>:

Name                     Age   Position
<S>                     <C>   <C>
Igor Dmitrowsky . . . .  52    President, CEO, CFO, Chairman of the Board
Walter Kaplinsky  . . .  69    Secretary
Andris Rukmanis . . . .  45    V.P. Europe and Director
Anita Schiff-Spielman    52    Director

<FN>
<FN1>
</FN>
</TABLE>
Our directors serve until the next annual meeting and until their
successors are elected and qualified. Our officers are appointed to serve
for one year until the meeting of the board of directors following the
annual meeting of stockholders and until their successors have been
elected and qualified. There are no family relationships between any
of our directors or officers.

Igor Dmitrowsky, President, Chief Executive Officer and CFO, founded the
Company and served as Chairman of the Board from its inception in August
24, 1989 to date. Mr. Dmitrowsky, a US citizen, born in Riga, Latvia,
attended the State University of
Latvia from 1972 to 1974 and Queens College from 1976 through 1979. In
1979, he founded American Kefir Corporation, a dairy distribution company,
which completed a public offering in 1986, and from which he retired in
1987.  Mr. Dmitrowsky has financed aircraft and automotive projects,
speaks fluent Latvian and Russian, and
has traveled extensively in the republics of the former Soviet Union.  In
1990, he testified before the House Aviation Subcommittee on the
implementation of United States' aviation authorities by US airlines.

Walter Kaplinsky, a US citizen, has been with the Company since 1990.  Mr.
Kaplinsky has been corporate secretary since 1993. In 1979, together with
Mr. Dmitrowsky, Mr. Kaplinsky was one of the co-founders of American Kefir
Corporation, where from 1979
through 1982, Mr. Kaplinsky served as secretary and vice president.

Andris Rukmanis, a citizen of Latvia, is the Company's Vice President in
Europe.  Mr. Rukmanis joined the Company in 1989. In Latvia, Mr. Rukmanis
has worked as an attorney specializing in business law.  From 1988 through
1989, he was Senior Legal Counsel
for the Town of Adazhi in Riga County, Latvia.  From 1989 to 1990, he
served as Deputy Mayor of Adazhi.

Anita Schiff-Spielman, a US citizen, serves as a director of the board.
She has been associated with the Company since its inception in 1989.  Ms.
Schiff-Spielman has owned Schiff Dental Labs, New York, NY, for the past
seventeen years.

Code of Ethics

We have not adopted a Code of Ethics that applies to all of our directors,
officers and employees, including our principal executive officer,
principal financial officer and principal accounting officer. We intend
adopt a Code of Ethics and intend to satisfy the disclosure requirement
under Item 10 of Form 8-K regarding an amendment to, or waiver from, a
provision of our Code of Ethics by filing a Current Report on Form 8-K
with the SEC, disclosing such information.

Committees of the Board of Directors

As of December 31, 2006, we do not have any committees of our board of
directors.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT, AS AMENDED.

Based solely upon our review of copies of Forms 3, 4 and 5, and any
subsequent amendments thereto, furnished to the Company by our directors,
officers and beneficial owners of more than ten percent of our common
stock, we are not aware of any our directors, officers or beneficial
owners of more than ten percent of our common stock that, during our
fiscal year ended December 31, 2006, failed to file on a timely basis
reports required by Section 16(a) of the Securities Exchange Act of 1934.

Item 10.  Executive Compensation.

No compensation has been paid to our executive officers during the fiscal
years ended December 31, 2006, 2005 and 2004.

OPTIONS/SAR GRANTS IN THE LAST FISCAL YEAR

No individual grants of stock options, whether or not in tandem with stock
appreciation rights ("SARs") and freestanding SARs have been made to any
executive officer or any director during our fiscal year ended December
31, 2006.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES

No individual exercises of stock options, whether or not in tandem with
stock appreciation rights ("SARs") and freestanding SARs have been made by
executive officer or any director during our fiscal year ended December
31, 2006.

LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR

We had no long-term incentive plans and made no stock awards during our
fiscal year ended December 31, 2006.

EMPLOYMENT AGREEMENTS

The Company has no individual employment agreements in place with any of
its executive officers or employees.

Future Compensation of Executive Officers

The board of directors approves salaries for the Company's executive
officers as well as the Company's overall salary structure.  For year one
following the closing of financing sufficient to commence flight
operations, the rate of compensation for the Company's executive officers
is expected to be:(i) President $186,000, (ii) Vice President Marketing
$82,000,and (iii) Vice President Europe $68,000.  To this date, the
Company has paid officers no salaries. Board directors are not presently
compensated and shall receive no compensation prior to commencement of
revenue service.

Item 11.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.


<TABLE>
<CAPTION>

As of March 29, 2007, there were 126,300,897 shares of common stock, par value
$0.0001 outstanding.  The following table sets forth, as of December 31,
2006, the ownership of the Company's Common Stock by (i)each director and
officers of the Company, (ii) all executive officers and directors of the
Company as a group, and (iii) all other persons known to the Company to
own more than 5% of the Company's Common Stock.  Each person named in the
table has or shares voting and investment power with respect to all shares
shown as beneficially owned by such person.

                               Common Shares
                            Beneficially Owned    Percent of Total
Outstanding
 Directors and Officers

<S>                                <C>                 <C>
Igor Dmitrowsky . . . . . .          50,422,825           39.58%
63-26 Saunders St., Suite 7I
Rego Park, NY 11374

Walter Kaplinsky  . . . . .           4,717,294            3.73%
2000 Quentin Rd.
Brooklyn, NY 11229

Andris Rukmanis . . . . . .           1,118,750            0.89%
Kundzinsala, 8 Linija 9.
Riga, Latvia LV-1005

Anita Schiff-Spielman . . .             113,118                *
1149 Kensington Rd.
Teaneck, NJ 07666

Shares of all directors and          56,371,987            44.63%
executive officers as a
group (4 persons)

Beneficial owners

Steffanie J. Lewis . . . . .          6,623,331           5.24%
3511 North 13th St.
Arlington, VA 22201

* Less than 1%

</TABLE>

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, and Director
Independence -

None.

Item 13. EXHIBITS.

3.1 Certificate of Incorporation of Baltia Air Lines, Inc. (incorporated
by reference to Exhibit 3.1 to Form 10-KSB filed on May 19, 2005)

3.2 Bylaws of Baltia Air Lines, Inc. (incorporated by reference to Exhibit
3.2 to Form S-8 filed on December 19, 2001).

23 Consent of Michael F. Cronin, CPA

31.1 Certification by Chief Executive Officer and Chief Financial Officer
pursuant to Sarbanes-Oxley Section 302, provided herewith.

32.1 Certification by Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S. C. Section 1350, provided herewith.

ITEM 14.     Principal Accountant Fees and Services

In 2006, the Company paid its present independent
accountant $4,000 for services in providing an audit of
the year 2005.  In 2007, the Company paid its present
independent Accountant $4,000 for services in providing
an audit of the year 2006. All other Company accounting
and tax preparations have been done in house.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Baltia Air Lines, Inc.

Date: 03-29-2007

/s/ Igor Dmitrowsky
By: Igor Dmitrowsky, President, CEO and CFO

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

   SIGNATURE   TITLE      DATE

/s/ Igor Dmitrowsky      Chairman, CEO and CFO         March 29, 2007
Igor Dmitrowsky         (Principal Executive Officer
               And Principal Accounting Officer)

/s/ Andris Rukmanis      V.P. Europe and Director      March 29, 2007
Andris Rukmanis

/s/ Anita Schiff-Spielman   Director               March 29, 2007
Anita Schiff-Spielman

Exhibit 31.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Igor Dmitrowsky, the Chief Executive Officer and Chief Financial
Officer of Baltia Air Lines, Inc., certify that:

1. I have reviewed this annual report on Form 10-KSB of Baltia Air Lines,
Inc.;

2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;

4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report
is being prepared;

(b) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's ability
to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.

Date: March 29, 2007

/s/ Igor Dmitrowsky
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer
(principal accounting officer)

EXHIBIT 32.1

BALTIA AIR LINES, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report Baltia Air Lines, Inc. (the
"Company") on Form 10-KSB for the period ended December 31, 2006 as filed
with the Securities and Exchange Commission on the date hereof (the
Report), I, Igor Dmitrowsky, Chief Executive Officer and Chief Financial
Officer (principal accounting officer) of the Company, certify, pursuant
to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.

A signed original of this written statement required by Section 906 has
been provided to Baltia Air Lines, Inc. and will be retained by Baltia Air
Lines, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request.

Date: March 29, 2007

/s/ Igor Dmitrowsky
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer
(principal accounting officer)